Farmers may need to return government payments

Farmers who accepted the first advanced Counter-Cyclical Payment (CCP) last fall for the 2003 crop may need to give it back. The reason is the increase in corn, soybean and wheat prices, says Gary Hachfeld, regional educator with the University of Minnesota Extension Service.

The CCP advance for corn was $0.077 per bushel; for wheat it was $ 0.031. Prices were high enough for soybeans that there was no advanced CCP made. “Producers will be receiving or may have already received a letter from the Farm Service Agency (FSA) alerting them to the repayment issue,” Hachfeld says

The refund policy offers two options for repayment. Option 1 allows producers to essentially do nothing, and the repayment will be subtracted from their 2004 final Direct Payment (DP) and/or the 2005 crop DP to be made in fall 2004. The producer will not have to write a check to the Commodity Credit Corporation (CCC) and there will be no interest charge on the repayment amount. A repayment statement will be issued showing the producer has satisfied the obligation. Option 1 is the default option and the producer does not need to take any action for the repayment to be made automatically.

Under Option 1, the producer will have more than enough DP funds to cover the cost of the CCP repayment. The total DP for corn is $ 0.28 per bushel; and for wheat the total DP amount is $ 0.52 per bushel. The 2004 final DP payment is half that, and the advance DP for 2005 is also half that amount.

Together, the DP amount is well above the CCP advances that may need to be refunded to FSA. To calculate the repayment amount, multiply the DP/CCP contract acres by the DP/CCP yield times .85 times the CCP advance amount.

Producers have a second choice for repayment. Under Option 2, the producer will be subject to the Debt Collection Improvement Act of 1996 (DCIA). The producer will be sent an initial notification of the repayment obligation followed by a first demand letter 30 days later. At that time, producers can settle the obligation by simply writing a check to CCC. If payment is not made within the 30 day period following the first notification, a second demand letter will be sent and at that time interest will begin accruing.

In order for a producer to select Option 2, they will need to notify their local FSA Office by June 15, 2004.

Exact overpayment amounts won’t be known until the end of the commodity marketing period, Hachfeld says. Those periods are July 2004 for wheat and October 2004 for corn and sorghum. Once the end of the marketing year arrives, the final repayment amount will be calculated. Producers will then need to make the repayment, if warranted.

If producers did not elect to take the 2003 crop advanced CCP, they will not receive the FSA letter and won’t have to make a repayment. If you have questions, Hachfeld says you need to contact your local FSA office.